Oil & Gas Prices - Mar 24

[dan_s]

Opening Prices:
> WTI is up $1.67 to $59.43/Bbl, and Brent is up $1.72 to $62.51/Bbl.
> Natural gas is up 0.6c to $2.514/MMBtu.

After the selloff of oil yesterday I get emails asking if I will be lowering my stock valuations. The answer is no because the oil price assumptions used in all of my models are WTI at $55/bbl in Q1 and $60/bbl in Q2. If WTI stays below $60 for several months I will lower the stock valuations, but I believe the global oil market is going to much tighter this summer.

AEGIS notes
Crude Oil

A downed ship in the Suez Canal has left dozens of vessels gridlocked, pushing oil prices higher this morning (Bloomberg)
The incident was expected to knock out traffic for several days initially, though new reports suggest the obstruction could be cleared as soon as today or tomorrow
The Suez Canal is responsible for around 12% of global trade and 8% of LNG, making it one of the most trafficked waterways in the world

OPEC+ should continue output limits or even increase its supply cuts in April in response to market softness – Citi
The bank said that the recent price drop has been driven by financial flows, rather than a change in fundamentals, and said oil “should only have one way to go – up.”
Citi projects Brent will average $62 in 1Q and $70 in 2Q

EIA weekly data is due at 9:30 am CST
U.S. Crude Inventories: + 704 MBbls (Avg. Bloomberg surveys)
U.S. Gasoline Inventories: + 1,102 MBbls
U.S. Distillate Inventories: – 45.30 MBbls
U.S. Refinery Utilization: +2.91% change < It has taken much longer than expected to get several of the Gulf Coast refineries up to full capacity. The unplanned power outages in late February caused a lot of problems.

Natural Gas

Natural gas flows into U.S. LNG facilities could soon suffer due to spring maintenance (Platts)
LNG demand in the U.S. has been running at record rates, but turnarounds are likely coming as four trains are approaching the one-year mark of service, according to S&P data
LNG facilities and LNG serving infrastructure affected:
> A Compressor station serving Cheniere’s Corpus Christi Pipeline will be offline for an annual emergency shutdown on April 8
> Cameron Interstate Pipeline, which feeds Sempra Energy’s Cameron LNG terminal, offered up to 100 MMcf/d of firm gas transport from March 26-April 14
This implies that the LNG facility would not need the gas for that time period
> Boardwalk Pipeline Partners’ Gulf South Pipeline, which feeds Freeport LNG, will be performing maintenance on several compressor stations March 30-April 24, according to notices to customers

The U.S. Energy Information Administration is expected to report a 22 Bcf withdrawal for the week ended March 19, according to Bloomberg’s survey of economist. A draw of 22 Bcf would be about half the five-year average, in what is possibly the last final net draw of the heating season
Demand destruction from the mid-February freeze remains an important variable in the South Central, according to Platts
On a weather-adjusted basis, ERCOT power loads remain weaker, indicating industrial consumption is still below pre-freeze levels

[dan_s]

Closing Prices:
> WTI prompt month (MAY 21) was up $3.42 on the day, to settle at $61.18/Bbl.
> NG prompt month (APR 21) was up $0.010 on the day, to settle at $2.518/MMBtu.

As we approach the end of each month and the front month NYMEX futures contract rolls forward we are going to see increase volatility in oil prices. There are lots of non-industry speculators trading oil futures. As we approach the exploration dates THEY MUCH CLOSE THEIR POSITIONS or take physical delivery.

The big ship stuck in the Suez Canal also messed up the supply chain.